hedge funds (HFs) have significant freedom in their investment activities because they are designed to be exempt from many of the registration and reporting requirements of the otherwise applicable securities laws, for example: By contrast, PE firms are geared toward longer-term investment strategies in illiquid assets, where they have more control or influence over operations to influence the long-term returns. HFs also do not have direct control over the business or asset in which they are investing. HFs differ from private equity (PE) firms in that HFs usually focus on short or medium term liquid securities that are more quickly convertible to cash. Compared to the heavily regulated mutual funds, HFs operate with a wide degree of investment latitude and are often leveraged to maximize their returns. While structurally similar to a mutual fund, HFs generally invest more aggressively and are limited to "qualified" investors ( i.e., those who meet certain net worth requirements, making them better able to tolerate the increased investment risk).
Venture capital fund definition professional#
Hedge funds (HF) are a type of investment partnership where a number of investors ( i.e., the limited partners) pool their funds together to be invested by a professional fund manager ( i.e., the general partner) according to the fund's investment strategy - which may be innovative or otherwise nontraditional when compared to more familiar investment options. 112–06) relaxed many existing securities law requirements, including the advertising prohibition on venture capitalists and companies seeking private equity investments. In 2012, the Jumpstart Our Business Startups Act (JOBS Act) ( Pub. Required hedge fund managers and private equity fund managers to register their funds with the Securities and Exchange Commission (SEC), but not venture capital managers, provided at least 80% of their fund holdings are in "qualifying investments" (generally shares in private companies).This restriction generally prevents banks from serving as venture capital investment firms. Prohibited banks from using their own money (as opposed to customer deposits) to make certain investments, including private equity (known as the Volker Rule).This changed in 2010 with the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. Venture capital is a type of private equity investment (see "Private Equity," above) and historically, private equity investments have been lightly regulated. More PE fund advisors are required to register with either the SEC or at the state level, resulting in increased recordkeeping obligations and the possibility of regulatory inspections.
The tradition of light regulation for PE funds changed in 2010 with the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C.
"Blue Sky Laws" - A common term for state securities laws.Securities Act - Regarding the issuance of securities to the public.Securities Exchange Act of 1934 (Exchange Act) - Regarding the distribution of securities.Investment Company Act of 1940 - Regarding the management and operation of a "fund.".US Investment Advisers Act of 1940 (Advisers Act) - Regarding the registration of fund managers with the SEC.Private equity funds are typically based on individual (private) contractual arrangements and therefore are exempt from the disclosure and other requirements applicable to publicly traded companies or investments, such as: In the U.S., private equity (PE) funds are typically formed as limited partnerships in the State of Delaware, pursuant to the Delaware Revised Uniform Limited Partnership Act (DRULPA) (though the laws of other states may be used instead).
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